Powerpoint Presentation ; How Eurobond Cash was Looted

7/25/2019 Powerpoint Presentation ; How Eurobond Cash was Looted

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I. THE LAW ON ACCOUNTING FOR NATIONAL GOVERNMENTREVENUES (FROM ALL SOURCES INCLUDING PROCEEDS OF

DEBT ISSUES)

1. The National Treasury did not payimmediately into the ConsolidatedFund, the FULL AMOUNT of the Net Proceeds of the Sovereign Bond ofUS$1,999,052,872.97 (KSh.173,917,599,948.39 at US$87.00) which werereceived on 24 June 2014 as required by Article 206(1) of the Constitution.

206. (1) There is established the Consolidated Fund into which shall be paid allmoney raised or received by or on behalf of the national government, exceptmoney thatis reasonably excluded from the Fund by an Act of Parl iamentand payable into another public fund established for a specific purpose;

2. The National Treasury did not obtain the approval of the Controller ofBudget, a Constitutional Office Holder, Prior Tomaking withdrawals from the NetProceeds of the Eurobond when effecting the repayment of the Syndicated Loanas required Article 206(4) of the Constitution.

Article 206 (4): Money shall not be withdrawn from the Consolidated Fund unlessthe Controller of Budget has approved the withdrawal.

3. As a consequence of the failure to pay the proceeds of the Eurobond INFULL into the Consolidated Fund, The National Treasury is also in breach ofArticle 221(6) of the Constitution as below:

4. Since the money was not paid into the Consolidated Fund, it followsthat any expenditure allegedly made from the portion of the Eurobond proceedsthat did not go into the Consolidated Fund are in breach of Articles 221 (6) andtherefore unconstitutional.


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221(6) When the estimates of national government expenditure, and theestimates of expenditure for the Judiciary and Parliament have been approved bythe National Assembly, they shall be included in an Appropriation Bill, which shallbe introduced into the National Assembly to authorise the withdrawal from theConsolidated Fund of the money needed for the expenditure, and for the

appropriation of that money for the purposes mentioned in the Bill.

II. EVIDENCE FROM THE REPORT OF THE AUDITOR GENERAL ON

BREACHES OF THE CONSTITUTION BY THE NATIONAL

TREASURY ON ACCOUNTING FOR EUROBOND PROCEEDS

5. The first incontrovertible proof that the proceeds of the Eurobond did notgo immediately, and in full, into the Consolidated Fund as required by theConstitution is found in the Auditor Generals 2013/2014 Report On The

Financial Statements For The National Government, which clearly states thatONLYUSD 395,439,262.50 (KSh.34,648,388,180.25) went into the ConsolidatedFund (the Exchequer).

6. The Auditor General also makes it clear in his report that Authority of theController of Budget to incur the expenditure was not obtained for USD604,560,737.50 (Kshs.53,201,344,900.00) withdrawn from the Offshore Accountto fund the repayment of the Syndicated Loan.

7. The only reason the Auditor General did not qualify the accounts on thismatter for FY 2013/14 was because was able to see the Balance of the Eurobond

Proceeds in an Offshore Account, with the expectation that this money was goingto be transferred fully into the Consolidated Fund in the next financial year2014/15.

8. Incidentally the Auditor Generals Report for FY 2014/15 has inexplicablybeen delayed and has not been issued in line with the Constitutional deadline of30 September 2015.

2.6.6. Failure to transfer proceeds from the Sovereign Bond to the National

Exchequer Account

Available information indicates that Net Proceeds From The Sovereign Bond of USD

1,999,052,872.97out of the total amount of USD 2,000,000,000.00were received on 24

June 2014and deposited into an OFFSHORE ACCOUNT, contrary to Article 206 of

the Constitution of Kenyaand Section 17(2) of Public Finance and Management Act,

2012which requires that all money raised or received by or on behalf of the National

Government be paid into the Consolidated Fund. There is the risk of proceeds being

appropriated without the authority of the Controller of Budget and also being applied for

other purposes other than those the Sovereign Bond was floated.

Out of the balance in the OFFSHORE ACCOUNTof USD 1,999,052,872.97 as at 2

July 2014an amount of USD 395,439,262.50 (Kshs.34,648,388,180.25) was on 3 July2014transferred to the Exchequer to fund infrastructure projectsand was accounted


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for in 2013/2014 financial year. On the same date of 3 July 2014 another amount of

USD 604,560,737.50 (Kshs.53,201,344,900.00)was withdrawn from the Offshore

Accountto fund the repayment of the syndicate loanbut was recorded in 2014/2015

financial year books. Authority of the Controller of Budget to incur the expenditure

was however not obtained.

The Statement of Receipts into and Issues from the Exchequer Account for

2013/2014therefore reflects only actual receipts from commercial loan of

Kshs.34,648,388,180.25 out of the net proceeds from the Sovereign Bond as a result of

failure to pay the full amount of the net proceeds from the Sovereign Bond of USD1,999,052,872.97 (Kshs.173,917,599,948.39) into the Consolidated Fundduring the

year.

I have however, not qualified my audit opinion on the Exchequer Account for the

year ended 30 June 2014 on the basis of this matter due to the fact that the Balance

Of Actual Net Proceeds from the Sovereign Bond is correctly reflected in the Off-

Shore Account and in the Central Bank of Kenya Special Account.

III. EVIDENCE FROM THE REPORT OF THE CONTROLLER OF

BUDGET ON BREACHES OF THE CONSTITUTION BY THE

NATIONAL TREASURY ON ACCOUNTING FOR EUROBOND

PROCEEDS

9. According to the Controller Of Budget the only receipt of Eurobondproceeds into the Consolidated Fund for the year 2014/15 is an amount of

US$815,436,932.00 (KSh.73,810,000,000.00 at 90.52) which were proceeds ofthe Eurobond 'Tap Sale". The Amount was paid in full into the Consolidated Fundon 17 December 2014.

10. Even though the Controller Of Budget has been appearing in RoadShows and Press Conferences in an attempt to support the National Treasury sposition on the Eurobond Matter, her public statements issued in pressconferences amount to nothing as she cannot negate or recant the contents inher Constitutional Reports made to Parliament. Indeed Mrs Agnes Odhiambo isat risk of committing perjury.

11. It is clear from the Both the Reports of the Auditor General andcontroller of the Budget that a balance of USD $999,052,872.97(KSh.86,067,866,868.14 at 86.15) has not been paid into the ConsolidatedFund as at 30 June 2015.

12. Below are extracts from the Report of the Controller Of Budget for FY2014/15.


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IV. CONCLUSIONS AND FOLLOW-UP ACTIONS RECOMMENDED

FOLLOWING BLATANT BREACHES OF THE CONSTITUTION BY

THE NATIONAL TREASURY IN ACCOUNTING FOR THE

PROCEEDS OF THE EUROBOND

13. Material and blatant breaches of the Constitution relating to accounting for receiptsof National Government Revenue with respect to the proceeds of the Eurobond.

14. The Constitution of Kenya, 2010 is the highest law of the Land. Its provisions onaccounting for National Government Revenue accordingly are the highest laws relating to

public financial managementand accounting. Any breachof the Constitutional Provisions,which has been demonstrated to have occurred on the Eurobond matter, have graveconsequences and must attract severe penalties and sanctions.

15. Simply stated the two top National Treasury officials are culpable for two reasons.Firstly, for not paying the Eurobond proceeds IMMEDIATELY and IN FULL, into theConsolidated Fund.


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16. Secondly, the two top National Treasury officials did not obtain the prior approvalof the Controller of Budget for all withdrawals from the Consolidated Fund asrequired under Article 206(4) of the Constitution.

17. Under the Constitution at Article 221(6), the Government can only spend moneythat has been appropriated by Parliamentin an Appropriations Bill (save for ConsolidatedFund services under Article 221(7)). If the National Treasury has spent all EurobondProceeds as it claims, then the two top National Treasury officials must face heavysanctions for expenditure that was not appropriated by Parliament.

18. Considering that the Eurobond proceeds amounting to US$ 999,052,872.97,equivalent to KES 87,766,528,223.47 were not paid into the Consolidated Fund, it followsthat alleged expenditure of this portion of the proceeds amounts to spending money whichhas not been appropriated by Parliament, contrary to Article 221(6)of the Constitution.


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V. TRACKING THE OFFSHORE BANK ACCOUNT MOVEMENTS OF

THE EUROBOND PROCEEDS

JP Morgan Chase Bank New York

19. According to documents posted on the National Treasurys website and which arealso contained in the document bundle that was tabled by Cabinet Secretary Henry Rotichbefore the Public Accounts Committee of Parliament (Bank Statements and SwiftTransfers) THE FIRST TRANSACTIONyou see on Bank Account Statement at JP MorganChase Bank New York is an entry of US$ 2,000,000,000.00 on 24 June 2014 being theproceeds of the Sovereign Bond.

20. The Fees and Costs deducted amounted to $947,127.03. the Net Proceedsreceived were thus US$ 1,999,052,872.97 (or KES 173,917,599,948.39).

21. THE SECOND TRANSACTIONis a debit entry of USD 604,560,737.50, equivalentto KES 53,201,344,900.00 on 3 July 2014 which, according to documents, moved toStandard Charted Bank London to repay the Syndicated Loan

22. THE THIRD TRANSACTION which occurs on the same day, 3 July 2014, is adebit entry of US$ 395,439,262.50equivalent toKSh. 34,648,388,180.25 which, accordingto documents, was a transfer to the Exchequer. This amount is clearly reflected in theAuditor Generals Report as a receipt into the Consolidated Fund in the FY2013/14.Because the payment is effected after the closure of the Financial Year this entry does notappear in the Report of the Controller Of Budget for FY 2013/14.

23. According to the JP Morgan Chase Bank New YorkBank Statement the accountis then CLOSED on 8 September 2014, and the balance of US$ 999,052,872.97,equivalent to KES 87,766,528,223.47 transferred in full to the Federal Reserve Bank ofNew York. Below are two Exceptsof Swift Transfers from the JP Morgan Chase Bank

Account and the transfer to an account at the Federal Reserve Bank of New York.


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24. Its crystal clear that after the money is moved to the Federal Reserve Bank ofNew Yorkfrom the Bank account at JP Morgan Chase Bank New York,everything goesblank, as there are no Bank statements or third partydocumentary evidence to showhow, when and where the US$ 999,052,872.97, equivalent to KES 87,766,528,223.47,moved.

25. The swift transfer to the Fed shows the document was heavily redacted, clearlyhiding information that could have been vital to tracing the movement of the money after itwas deposited into the account at the Federal Reserve Bank of New York

Citibank, NA New York

26. We must remember that In December 2014, the Government went back into themarket and through a TAP SALE, managed to raise an additional amount of US$815,436,932.00, equivalent toKES 73,805,196,715.32. A Citibank Bank statement postedon the National Treasury Website shows an entry of US$ 815,436,932.00 received on 3December 2014.

27. As opposed to the proceeds of the original Eurobond transaction, the statementsshow clearly that the proceeds of the tap sales were transferred promptly to theConsolidated Fund, as confirmed by the Report by the Controller of Budget (BudgetImplementation Review Report FY 2014/15at page Seven Table 3.1, col. 2).

28. Below is an extract of the swift transfer/Bank statement from the Citibank New Yorkaccount which clearly shows the movement of the proceeds of the tap sales from theOffshore Account in New York to the Consolidated Fund as required under Article 2016(1)of the Constitution of Kenya, 2010.


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29. cc


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VI. AN ELABORATE SCHEME OF DECEPTION BY THE NATIONAL

TREASURY IN ACCOUNTING FOR THE EUROBOND PROCEEDS

A RIDDLE OF NUMBERS THAT DO NOT ADD UP, REDACTED

BANK STATEMENTS AND ONE- LINE LETTERS TO THE CENTRAL

BANK PURPORTING TO TRANSFER NON EXISTENCE RECEIPTS.

The Mystery of 7 letters purporting to direct the CBK to make Non ExistenceTransfers to the Consolidated Fund

30. If you want to track the complex game of deception by the National Treasury, youstart by examining the seven letters one sentence letters from the Accountant General atthe National Treasury Mr BM Ndungu to the CBK where he purports to direct the Central

Bank to transfer parts of the US$ 999,052,872.97 (KSh. 87,766,528,223.47).

31. Indeed these seven letters contained in the Bundle of Documents table before thePublic Accounts Committee (PAC) are the main tools which the Treasury relies on in a bidto prove that the US$ 999,052,872.97 (KSh. 87,766,528,223.47) of the Eurobond proceedswere paid into the consolidated Fund.

32. It is clear from all the press statements and releases of information to the public bythe National Treasury that all the tables purporting to show that the money was paid into theConsolidated Fundare based on these letters.

33. The first of these letters dated 15 September 2014 purports to direct the CBK totransfer KSh. 25Bn to the Consolidated Fund (Exchequer A/C) number 1000003987.

34. The last of these letters is made on 26 June 2015 and purports to direct the CBK totransfer KSh.17,268,281,131.75 from the Sovereign Bond Account No.1000212764to theConsolidated Fund (Exchequer A/C) number 1000003987.

35. The details of the rest of these letters are set out in the table below (overleaf) and inAPPENDIX 1-7.


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THE KENYA EUROBOND PROCEEDS (SOVEREIGN BOND)AMOUNTS THAT THE NATIONAL TREASURY INSTRUCTED THE CENTRAL BANK TO TRANSFER INTO THE EXCHEQUER ACCOUNT

FROM DOCUMENTS SUBMITTED TO PARLIAMENT

SN. DESCRIPTION AND REFFrom Account/ To Account

AMOUNT KSH

1 15 Sept 2014 Transfer of Special Bond Proceeds to the ExchequerA/C. No 1000212764 Sovereign Bond AccountA/C No. 1000003987Consolidated Fund (Exchequer)

AG / CONF.17 / 1 / 1. Vol. 1 (25) 25,000,000,000

2 19 Sept 2014 Transfer of Special Bond Proceeds to the ExchequerA/C. No 1000212764 Sovereign Bond AccountA/C No. 1000003987Consolidated Fund (Exchequer)

AG / CONF.17 / 1 / 1. Vol. 1 (22) 25,000,000,000

3 28 Oct 2014 Transfer of Special Bond Proceeds to the ExchequerA/C. No 1000212764 Sovereign Bond AccountA/C No. 1000003987Consolidated Fund (Exchequer)

AG / CONF.17 / 1 / 1. Vol. 1 (25) 15,000,000,000

4 21 Jan 2015 Transfer of Special Bond Proceeds to the ExchequerA/C. No 1000212764 Sovereign Bond AccountA/C No. 1000003987Consolidated Fund (Exchequer)

AG / CONF.17 / 1 / 1. Vol. 1 (44) 25,000,000,000

5 16 Mar 2015 Transfer of Special Bond Proceeds to the ExchequerA/C. No 1000212764 Sovereign Bond AccountA/C No. 1000003987Consolidated Fund (Exchequer)

AG / CONF.17 / 1 / 1. Vol. 1 (50) 25,000,000,000

6 2 June 2015 Transfer of Special Bond Proceeds to the ExchequerA/C. No 1000212764 Sovereign Bond Account

A/C No. 1000003987Consolidated Fund (Exchequer)

AG / CONF.17 / 1 / 1. Vol. 1 (58) 30,000,000,000

7 26 June 2015 Transfer of Special Bond Proceeds to the ExchequerA/C. No 1000212764 Sovereign Bond AccountA/C No. 1000003987Consolidated Fund (Exchequer)

AG / CONF.17 / 1 / 1. Vol. 1 (59) 17,268,281,131.75

Total 162,268,281,132


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VII. WHY DO WE SAY THE SEVEN PURPORTED TRANSFER

INSTRUCTION LETTERS ARE NOT AUTHENTIC, AND WERE

HURRIEDLY PUT TOGETHER TO SUPPORT THE MAKE - BELIEVE

NARRATIVE BY THE NATIONAL TREASURY THAT EUROBOND

PROCEEDS WERE ACTUALLY DEPOSITED INTO THECONSOLIDATED FUND?

We examine the Anomalies in the Treasurys purported transfer instructions

36. Considering the seven purported transfer instructions are supposed to beimportant accounting documents transferring billions of shillings from one account toanother, it was incumbent on the National Treasury to ensure they are prepared with thehighest standard of fidelity. Indeed fidelity is so critical in preparing these accountabledocuments that even minute details like dates of the transactions and document

referencesmust by correct.

37. As a matter of fact the seven purported transfer instructions are supposed torepresent authentic transactions and must be backed by adequate supporting documentsthat leave a solid, auditable trail. At a minimum, these transactions are supposed to havethe same, if not higher, levels of documentation, approvals and controls.

38. What then do you see as you scrutinise these seven purported transferinstructions? The first tell tale sign of anomalies is the manner in which they arereferenced and how the folios are sequenced.

39. As you can see from table XX the first purported transfer instruction dated 15September 2014 has a folio reference of AG/CONF.17 / 1 / 1. Vol. 1 (25). The second

purported transfer instruction dated 19 September 2014 has a folio reference ofAG/CONF.17 / 1 / 1. Vol. 1 (22). The third letter dated 28 October 2014 has folio referenceAG/CONF.17 / 1 / 1. Vol. 1 (25) with the last, purporting to transfer a sum ofKSh.17,268,281,131.75 into the Consolidated Fund, and which is dated 26 June 2015,bearing the folio reference AG / CONF.17 / 1 / 1. Vol. 1 (59).

40. From the sequence in which the folios are referenced, it is clear that the referencing

falls way short of what is expected of credible accountable documents transferring billionsof Shillings from one account to another. What we observe is a haphazard numberingwhere Folio reference numbers go up and down unpredictably, casting doubt on theircredibility of thepurported transfer instructions.

41. Even more critical, what dents the credibility of these purported transfer instructionletters is the fact that you have a case where one document purporting to transfer the sumof KSh.25, 000, 000, 000 on 15 September 2014 into the Consolidated Fund and separatedocument dated 28 October 2014 purporting to transfer the sum of KSh.15, 000, 000, 000into the Consolidated Fund bear the same folio refrence number of AG/CONF.17 / 1 / 1.

Vol. 1 (25).


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42. We all know that accountable documents must have unique document referencesfor clear identification and accounting purposes. In the current circumstances, when we aretalking about billions of shillings being transferred from one account to another, theinference is that either these transfers did not take placeor the documents are a forgeryon hardworking Kenyan taxpayers executed in broad daylight, akin to daylight robbery.

VIII. IS THERE EVIDENCE THAT THE CBK ACTED ON THE SEVEN

PURPORTED TRANSFER INSTRUCTIONS? WAS MONEY INDEED

TRANSFERRED TO THE CONSOLIDATED FUND AS A

CONSEQUENCE OF THE SEVEN PURPORTED TRANSFER

INSTRUCTIONS?

43. There is no evidence that thesepurported transfer instructions were effected oracted on by the Central Bank Of Kenya. If the amount of USD 999mn that these purported

transfer instruction sought to transfer into the consolidated fund, they would have beenreflected in the report of the controller of budget for FY 2014/15.

44. The paper trail also shows that where the Central Bank of Kenya acted on genuinetransfer instructions, as was the case in the transfer from JP Morgan Chase Bank of USD395mn on 3 July 2014, and the transfer from Citibank New York of the Tap Sales on 17December 2014 the amounts are clearly captured in the Reports of the Auditor General forFY 2013/14 and the Controller of Budget for FY 2014/15.

45. You will also observe that where there are genuine instructions transferring

Eurobond Proceeds into the Consolidated Fund you will see an auditable trail ofaccountable documents as below (see also APPENDIX 8, 9, 10,11)

I. TRANSFER INSTRUCTIONfrom the TreasuryII. GOVERNMENT REMITTANCES IN FOREIGN EXCHANGE Form (Form PA)

signed by the Accountant General Mr Bernard Ndungu and his Deputy JuliusKilinda and approved by National Treasury Principal Secretary, Dr Kamau Thugge;

III. CREDIT ADVISE from Central Bank Of Kenya and or CONFIRMATION FROMCENTRAL BANKadvising the National Treasury that the Consolidated Fund hasbeen credited with the transfer.

46. It is clear from the paper trail with regard to ALLthepurported transfer instructionsthat there is no Government Remittances In Foreign Exchange Form (Form PA), orCredit Advise or Confirmation from the Central Bank Of Kenya advising the NationalTreasury that the Consolidated Fund has been credited with the transfer

47. The lack of credibility of the seven instructions purporting to transfer USD999mn into the Consolidated Fundis perhaps best illustrated by correspondence dated 15January 2015 between the Central Banks Director of Financial markets and the NationalTreasury.

48. As we all know and is manifestly clear form the FY 2014/15 Report of the Controllerof Budget and the Report of the Auditor General for FY 20134/24, only two amounts from


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the Eurobond proceeds, namely an amount of US$395,439,262.50and US$815,436,932.00went into the Consolidated Fund.

49. You will notice from the paper trail that in both cases the Central Bank of Kenyaconfirmed the transfers into the Consolidated Fundthrough Confirmation Lettersdated 4July 2014 and 15 January 2015 signed by Mr John K Birech (Assist. Director, ExternalPayments and Reserves Management) and Mr Gerald Nyaoma (Director, FinancialMarkets), respectively.

50. Mr Gerald NyaomasConfirmation letter also serves to destroy the credibility of theseven Purported Transfer Instructionsin a more profound manner. In his letter dated 15January 2015 Mr Nyaoma clearly confirms that the proceeds of the Tap Sales was creditedin full, as one lump sum, into the Consolidated Fund in the amount of US$815,436,932.00,equivalent to KSh. 73,805,196,715.32. The statements from Citibank New York also attestto this single lump sum transfer of the tap sales that was effected on 17 December 2014.

51. The mischief in the National Treasurys narrative as presented by the sevenPurported Transfer Instructions is in the fact that they purport to show that theUSD999mn plus the Tap Sales of USD 815mn, trickled into the Consolidated Fund inamounts which do not reflect the single credit of US$815,436,932.00, equivalent to KSh.73,805,196,715.32 as confirmed by the Central Banks director Mr G. Nyaoma, andreflected in the Citibank NY statement and in the 2014/15 Report of the Controller ofBudget.

CONCLUSION

52. The seven Purported Transfer Instructions are not genuine. Period.

53. The consequences of the above finding are grave in the extreme.

I. A colossal sum of USD999mn has not been paid into the Consolidated Fundand Responsible Officials of the National Treasury have gone to extraordinarylengths to, in effect, manufacture documents to mislead Kenyan taxpayers.

II. If these seven Purported Transfer Instruction documents are not authenticasamply demonstrated by the paper trail from the Document Bundle presented to thePac in Parliament and documents posted in the National Treasurys website-then itfollows that Responsible Officials of the National Treasury must be made toaccount for presenting misleading documents to the Pubic Accounts Committee ofthe National Assembly

III. Considering that the seven Purported Transfer Instruction are the basis uponwhich the National Treasury insists that they have fully accounted for the Proceedsof the Eurobond, then the National Treasury has no legs to stand on as its clear thatthe USD $999,052,872.97is yet to be accounted for.


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IX. ARE THE JP MORGAN CHASE BANK STATEMENTS POSTED ON

THE NATIONAL TREASURYS WEBSITE GENUINE

54. What is strange is that the JPMorgan Chase Bank Statements on the EurobondProceeds posted by the National Treasury on their website, were issued by JPMorganChase Bank, NA (Johannesburg Branch), despite the fact that the Eurobond transactionswere made with the parent bank in New York.

55. This raises the following questions. Why would a sovereign state like Kenya chooseto bank the Eurobond proceeds denominated in United States Dollars in South Africa, aNon Dollar Domicile Country?

56. Firstly its uncommon for a Branch to issue Bank statements for customers of theirParent Bank whose accounts are not domiciled with them.

57. Considering that the South Africa Branch of JP Morgan is registered as branch of aforeign bank, are they legally empowered to issue bank statements for a client who is not aclient of the south African branch, but is a client of the parent bank in new York

58. The issue of capacity of the JP Morgan Chase Branch in SA to issue the statementsarises well. An examination of its own balance sheet based on normal prudential regulatoryrestrictions on deposit taking would not support the deposits of USD 2bn by Kenya.

59. In any case the Total Assets of JPMorgan Chase Bank, NA (JohannesburgBranch)of USD 2.9bn approx. would not be sufficientto allow the Johannesburg Branchto receive deposits of the magnitude of Kenya's Eurobond (USD 2bn or about 66% of theirasset base). See APPENDIX 12-13


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X. COVER-UP: HOW THE NATIONAL TREASURY USED THE SEVENPURPORTED TRANSFER INSTRUCTIONS TO COVER THE GAP OF

USD USD 999MN NOT REMITTED INTO THE CONSOLIDATED

FUND

MOVEMENT IN SOVEREIGN BOND ACCOUNTS:

US Ex-Rate KShs

1 Proceeds from Sovereign Bond 2,000,000,000.00 87.00 174,000,000,000.00

Less Commissions deducted at source (947,127.03) 87.00 (82,400,051.61)

2 Net proceeds received in offshore A/C 1,999,052,872.97 173,917,599,948.39

Less Transfer to Exchequer A/C on 30.06.2014 for infrastructure projects in FY2013/2014 (395,439,262.50) 87.62 (34,648,388,180.25)

Add Exchange gain on translation of closing balance 1,239,412,781.24

3 Balance in Off-shore account as at 30th June 2014 1,603,613,610.47 87.62 140,508,624,549.38

Less Payment of syndicated loan on 02.07.2014 (604,560,737.50) 88.00 (53,201,344,900.00)

Less Commissions and bank charges:

(i) Account settlement charges (156,394.64) 88.00 (13,762,728.32)

(ii) Interest payment 169,415.65 88.00 14,908,577.20

(iii) Federal Interest withheld (47,436.38) 88.00 (4,174,401.62)

Add Exchange gain on translation of closing balance before transfer 1,158,833,323.80

4 Balanc e tr ans fer red to Sov er eign Bond Ac count at CBK on 08/09/2014 999,018,457.60 88.55 88,463,084,420.45

Less Payments from the S/Bond account at CBK A/C No. 1000212764:

(i) Amount transferred to Exchequer A/C on 15.09.2014 (25,000,000,000.00)

(ii) Amount transferred to Exchequer A/C on 19.09.2014 (25,000,000,000.00)

(iii) Amount transferred to Exchequer A/C on 30.10.2014 (15,000,000,000.00)

5 Total payments from S/Bond account at CBK: (65,000,000,000.00)

6 Balance in Soveregn Bond Account at CBK as at 31st October 2014 23,463,084,420.45

Add Proceeds from the tap sale:

7 (i) Face Value of the proceeds 750,000,000.00 90.51 67,882,499,999.98

(ii) Premium on issue of tap sale 65,684,271.00 90.51 5,945,083,368.21(iii) Less Commissions and transaction expenses deducted at source (247,339.00) 90.51 (22,386,652.89)

8 Net proceeds transferred to S/Bond ac count at CBK 17.12.2014 815,436,932.00

90.5173,805,196,715.30

9 Balance in Soveregn Bond Account at CBK as at 31st December 2014 97,268,281,135.75

-

Less transfers to Exchequer Account:



10 Balance in Soveregn Bond Account at CBK as at 31st March 2015 47,268,281,135.75

11 Less transfers to Exchequer Account:



12 Balance in Soveregn Bond Account at CBK as at 30th June 2015 -


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XI. COMMON MYTHS THAT SURROUND THE EUROBOND SAGA

60. The following common myths surround the Eurobond saga:

I. MYTH: That the repayment of the Syndicated Loan directly from the offshoreaccount saved Kenya from making losses on foreign exchange.

II. FACT: The National Treasury can instruct the Central Bank to pay monies into theConsolidated Fund and simultaneously effect loan repayments denominated inforeign currency out of the Consolidated Fund without loss of translation into localcurrency. Indeed the Central Bank, as the ultimate repository of foreign reserves forthe Country, is in the best position for mitigating foreign exchange losses for theNational Treasury. The Treasury belated realised this point and abandoned the socalled saving Foreign exchangenarrative and instead quickly started trumpeting

the foreign exchange gains made on the JP Morgan account.

III. MYTH: That the Eurobond boosted Kenyas foreign reserves position

IV. FACT: Increases in Kenyas foreign exchange reserves come from a variety ofsources, including FDI inflows, export receipts, Diaspora remittances, donor andlender disbursements, and the large borrowings from the IMF in recent monthsincluding the Precautionary Facility. To attribute all the increases to the Eurobond isinaccurate. In any case foreign exchange reserves are not national governmentrevenues available for public expenditure. It must be remembered that Kenya

issued the Eurobond to raise money to fund infrastructure projects and other pub,icexpenditure, not to boost our reserves.

V. MYTH. The provisions of the Constitution in respect of accounting for revenues andPublic Funds is inferior to the PFM law.

VI. FACT: The Constitution is the supreme law of the land. Any provision of any lawthat is in consistent with the Constitution is null and void (to the extent of theInconsistency).

VII. MYTH. There is nothing special about the Consolidated Fund as the PFM Lawallows the National Treasury to open as many accounts as the Cabinet Secretarydeems necessary.

VIII. FACT: the Constitutional Provisions on Public Fundsoverride the PFM Law. TheCabinet Secretary can open as many Bank Accounts as he wishes as long as hedoes not breach the Constitution.

IX. MYTH: the Eurobond proceeds were accounted for correctly as required under theConstitution


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X. FACT. Material breaches of the Constitution have covered in accounting andfinancial management of the Eurobond proceeds. Indeed accounting and financialmanagement constitutes the greatest failure in respect of the Eurobond proceeds.

XI. MYTH. Bank accounts and Public Funds are the same and can be usedinterchangeably.

XII. FACT; The Constitution goes to great lengths to define PUBLIC FUNDS as aspecial repository for receiving, issuing and accounting for national Governmentrevenues and expenditures. Indeed Public funds can only be created by theConstitution itself or under an Act Of Parliament.

XIII. MYTH. In an interview with the Business Daily newspaper the National TreasuryCabinet Secretary denied knowledge of the account at the Federal Reserve BankOf New York.

XIV. FACT; The evidence appears as appended at APPENDIX 14.


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KNOWN FACTS ON THE PROCEEDS OF THE SOVEREIGN BOND PAID INTO THE EXCHEQUER ACCOUNTFROM THE COB ANNUAL REPORTS FY2013/14 AND FY2014/15 AND AUDITOR GENERAL REPORTS FY2013/14

(Description As Per From The Respective Reports) DATE AMOUNT USD Exch. Rate AMOUNT KES

RECEIPTSOF SOVEREIGN BOND PROCEEDS

Net Proceeds from the Sovereign Bond Note 1 and Note 2 24-Jun-14 $1,999,052,872.97 $87.00 173,917,599,948.39

Commercial Loan (Sovereign Bond 'Tap Sale") Note 2 17-Dec-14 $815,436,932.00 $90.52 73,810,000,000.00

Total Sovereign Bond Proceeds A $2,814,489,804.97 $88.02 247,727,599,948.39

PAYMENTSFROM SOVEREIGN BOND PROCEEDS

Transferred To The Exchequer to Fund Infrastructure Projects Note 1 3-Jul-14 $395,439,262.50 $87.62 34,648,388,180.25

Revenues from Commercial Loan (Sovereign Bond 'Tap Sale") Note 2 17- Dec-14 $815,436,932.00 $90.52 73,810,000,000.00

Subtotal: Transfers to the Consolidated Fund (= Exchequer A/C) $1,210,876,194.50 $108,458,388,180.25Repayment Of Syndicate Loan Withdrawn from Offshore Account Note 1 3-Jul-14 $604,560,737.50 $88.00 $53,201,344,900.00

Eurobond Proceeds Paid Into Exchequer A/C + Syndicated Loan Repayment A $1,815,436,932.00 $89.05 $161,659,733,080.25

BALANCE NOT PAID INTO EXCHEQUER A/C AND THUS UNACCOUNTED FOR B-A $999,052,872.97 $86.15 $86,067,866,868.14

Note 1: Summary Of The Report Of The Auditor-GeneralOn The Financial Statements For Ministries, Departments, Commissions, Funds And OtherAccounts Of The National Government For The Year 2013/2014 (relevant extract of Report reproduced in Full below)

Note 2: Annual National Government Budget Implementation Review Report FY2014/15

From Table 3.1: Statement of Actual Revenue as at the end of June 2015 (Kshs. Billion)see extract overleaf


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THE KENYA EUROBOND PROCEEDS (SOVEREIGN BOND)AMOUNTS THAT THE NATIONAL TREASURY INSTRUCTED THE CENTRAL BANK TO TRANSFER INTO THE EXCHEQUER ACCOUNT

FROM DOCUMENTS SUBMITTED TO PARLIAMENT

SN. Date DESCRIPTION AND REF AMOUNT KSH1 15 Sept 2014 Transfer of Special Bond Proceeds to the Exchequer AG / CONF.17 / 1 / 1. Vol. 1 (25) 25,000,000,000

2 19 Sept 2014 Transfer of Special Bond Proceeds to the Exchequer AG / CONF.17 / 1 / 1. Vol. 1 (22) 25,000,000,000

3 28 Oct 2014 Transfer of Special Bond Proceeds to the Exchequer AG / CONF.17 / 1 / 1. Vol. 1 (25) 15,000,000,000

4 21 Jan 2015 Transfer of Special Bond Proceeds to the Exchequer AG / CONF.17 / 1 / 1. Vol. 1 (44) 25,000,000,000

5 21 Jan 2015 Transfer of Special Bond Proceeds to the Exchequer AG / CONF.17 / 1 / 1. Vol. 1 (50) 25,000,000,0006 16 Mar 2015 Transfer of Special Bond Proceeds to the Exchequer AG / CONF.17 / 1 / 1. Vol. 1 (58) 30,000,000,000

7 21 Jan 2015 Transfer of Special Bond Proceeds to the Exchequer AG / CONF.17 / 1 / 1. Vol. 1 (59) 17,268,281,131.75

Total 162,268,281,132


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TYPES AND METHODS OF ESTABLISHMENT OF PUBLIC FUNDS IN KENYAType/Name of Fund Authority to establish

Fund & ScopeSource of Funds /Expenditure chargeable to

Administrator / AuditorGeneral Audits Accounts

Reference

ConstitutionalPublic FundsJudiciary Fund Constitution of Kenya National Government Revenue

Consolidated FundChief Registrar, Judiciary Article 173(1)

Equalization Fund Constitution of Kenya National Government Revenue, 0.5%Consolidated Fund, Un-expended balancesretained in Equalization Fund, and are not

part of Consolidated Fund

National Treasury Article 204(1)

Consolidated Fund Constitution of Kenya National Government Revenue National Treasury Article 206(1)Revenue Fundfor each County Government

Constitution of Kenya National Government Revenue National Treasury Article 207(1)

Contingencies Fund Constitution of Kenya National Government Revenue Cabinet Secretary Finance Article 208 (1)Constitutional, Statutory Public FundsPolitical Parties Fund Constitution of Kenya & Act

for ParliamentPublic Resources per Article 91(2)(e)Establishment, Management per its Act

National TreasuryOAG to Audit accounts

Article 92(f)

National Public Fund establishedfor a specific purpose

Constitution of Kenya & Actfor Parliament

NationalGovernment Revenue "reasonablyexcluded from the (Consolidated) Fundby an Act of Parliament

Accounting Officer/CEO asprovided for under its ActOAG to Audit accounts Article229(4)(b), (h); 229(5)

Article 206(1)(a)

County Public Fund establishedfor a specific purpose

Constitution of Kenya & Actfor Parliament

CountyGovernment Revenue "reasonablyexcluded from the (County) RevenueFundby an Act of Parliament

Accounting Officer/CEO asprovided for under its ActOAG to Audit accounts Article229(4)(b), (h); 229(5)

Article 207(1)Article 207(3)(b)

Discretional Public FundsPublic Fund Established and wound up at the discretion of the Finance Cabinet

Secretaryfrom Consolidated FundCabinet Secretaryresponsiblefor Finance

PFMA S.24(4)

Statutory Public FundsNational Public Funds earmarked for specific purposesand established by an Act of

Parliamentfrom/chargeable to Consolidated FundAccounting Officerper Act establishing Fund

PFMA S.24(12)PFMA S.24(13)


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Powerpoint Presentation ; How Eurobond Cash was Looted

Documents

Transcript of Powerpoint Presentation ; How Eurobond Cash was Looted